Without emerging markets, Japan and consumer healthcare, GlaxoSmithKline's ($GSK) second quarter earnings announcement would just be a sea of negative numbers. Thanks to positives in those three areas, overall sales were down just 2%. Europe and U.S. on the other hand, are in a world of hurt.
European drug sales dropped by 8%. U.S. sales fell 6%. Generics hit revenues, with rivals to the antiviral Valtrex, the HIV drugs Combivir and Epivir, and the Parkinson's drug Requip all hitting the brands. Europe's decline also puts into numerical terms the warnings and laments CEO Andrew Witty has been issuing as president of the European Federation of Pharma Industries and Associations.
In fact, things in Europe are so bad that Glaxo is reorganizing its regional commerical operation and management structure. Abbas Hussain, who's been leading the charge into emerging markets, will take Europe under his wing, too. "These changes will improve GSK's ability to realize new growth opportunities"--in emerging markets--"and remain competitive in the current global pricing environment," Witty said in a statement.
Looking forward, Witty is touting the company's growing new drugs, including the kidney cancer drug Votrient, and its late-stage pipeline. Plus, some existing franchises are weathering generics well; for instance, the seizure and bipolar brand Lamictal saw sales increase by 14%, to $227 million, on growth of its once-a-day version, despite generic rivals to the immediate release form.
On the margin side, GSK benefited from a lower tax rate this quarter, and it's aiming to lower taxes even more. It's also looking for manufacturing process improvements to deliver $775 million in savings by 2015. In his covering letter, Witty referred to "further action to reduce our cost base" during the rest of this year, hoping for better times in 2013.
- read the release from GSK (PDF)